What Cryptocurrencies Are A Good Investment For IRA Portfolios?

Saving for retirement is essential. One popular investment vehicle that many investors opt to use is the individual retirement account (IRA). IRA rules allow you to enjoy a tax-deferred or tax-free growth of your retirement savings, and it includes a broad range of financial products such as bonds, mutual funds, stocks, and ETFs. Another financial asset that’s quickly becoming popular are cryptocurrencies, such as Bitcoin.
But given the volatility associated with cryptocurrencies, are they really suitable for your IRA? Read on to learn about how to tell if cryptocurrencies are stable enough for your IRA.

What’s A Cryptocurrency IRA?

Before we even dive into explaining whether cryptocurrencies are stable enough for your IRA, you must first understand a cryptocurrency IRA. The cryptocurrency IRA involves a custodian and other company such as coinIRA holding a cryptocurrency rather than traditional assets such as bonds, stocks, or precious metals in a self-directed IRA. Despite cryptocurrencies not being indisputably permitted by the IRS regulations, there isn’t any specification on the self-directed plans that are investable. Instead, only non-allowed transactions and investments are mentioned. As a result, both the brokers and custodians of cryptocurrencies deem this to be a clear indication that cryptocurrency IRAs are acceptable as capital assets.

In fact, there are over 6,000 different cryptocurrencies that you can invest with your IRA. You have the option of investing your capital into new initial coin offerings (ICO) or into popular currency such as bitcoin. Overall, the entire cryptocurrency market is worth over $600 Billion with estimates to grow over $2 Trillion. With such a large market cap, you may want to consider buying different cryptocurrency offerings for your IRA holdings.

What Are The Advantages Of Cryptocurrency IRA?

To help you better understand whether cryptocurrencies are stable assets for the best IRA, we’ll take you through the advantages of cryptocurrency IRAs. Here’s an overview of the benefits of the cryptocurrency IRA:

Security: With the cryptocurrency IRA, you don’t have to worry about the safety of your hard-earned money. This is because every transaction is secured using numerous security features set by a peer-to-peer protocol on the blockchain network. Even though there’s still a lot of skepticism on the stability of cryptocurrency IRA, this will help you enjoy peace of mind.

Diversification: The best way to hedge against risk is through diversification, and a cryptocurrency IRA allows you to enjoy exactly this. With the popularity of cryptocurrencies expected to grow in the long-term, investing in a cryptocurrency IRA is an excellent way to reap huge profits in the future. This is a valid reason to invest in the cryptocurrency IRA despite skeptics stating these assets are volatile, unstable, and untested, unlike mutual funds and stocks. By diversifying your retirement portfolio, you safeguard yourself from a possible economic downturn that could affect your retirement accounts in the future.

Out of touch from banks: The switch to cryptocurrencies was hugely propelled by the desire to steer away from the reach of banks and other financial institutions regulated by the government. If you want an IRA investment vehicle not to be accessed by other institutions, this is what cryptocurrencies guarantee you.

Tax-free growth: Another advantage of having a cryptocurrency IRA is that any growth on these assets is tax-deferred. This means you make more money than you would have if you instead opted to invest in IRA comprising ETFs, bonds, stocks, or no-load mutual funds.

Limit inflation: With cryptocurrency IRA, the artificial inflation of supply isn’t possible because of technology’s adaptive scaling.
Despite these many benefits, one issue you’ll encounter is finding a custodian open to using cryptocurrency in an IRA. However, this is slowly changing with a growing number of companies and custodians nowadays a bit more lenient and accepting of cryptocurrency IRA.

What Are The Drawbacks Of A Cryptocurrency IRA?

If you’re an investor, you must know that every financial asset comes along with its own fair share of risk—the same applies for the cryptocurrency IRA. Here’s a few of the downsides you need to know about:

Higher fees and risk: You’ll be required to pay more for trading Bitcoin in an IRA, unlike traditional assets such as bonds. This usually happens because the trading of cryptocurrency differs from trading of regular stock. In addition, the tax benefits enjoyed are also the reason for this greater risk and fees. The reason for this is the companies providing these self-directed IRA services aren’t compelled by traditional brokers’ fiduciary responsibilities. Therefore, it’s up to you as the investor to assess the risks linked to the crypto markets.

Cryptocurrency volatility: One issue that characterizes the different cryptocurrencies from Ethereum, Bitcoin, and other cryptocurrencies is their volatility. As a result, these cryptocurrencies become a hard sell for your savings as a suitable investment vehicle.

If you were conflicted on the stability of cryptocurrencies for your IRA, this in-depth guide has hopefully enlightened you with useful details which are important to know if you are considering this investment option. With many pessimists stating that cryptocurrencies are a greater risk than stable assets such as stocks and bonds, it’s easy to get scared—however, you now know that a cryptocurrency IRA can also be a great investment vehicle for your retirement savings.

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